BOSTON (TheStreet) -- Miller Tabak is a relative newcomer to Wall Street, but the firm has rapidly expanded trading and research by generating unique investment strategies. Its Best Ideas for 2011 comprises 10 stock picks. Three of its four small-cap selections are lesser followed and may offer significant upside in 2011. Here is a closer look.
Forward P/E: 12 (60% Industry Discount)
Sales Multiple: 0.5 (82% Industry Discount)
Book Value Multiple: 5.6 (4% Industry Discount)
Cash Flow Multiple: 6.9 (54% Industry Discount)
Analyst Ratings: Analysts are bullish on Cracker Barrel. Eight, or 73%, advise purchasing its stock and three recommend holding it. Sidoti & Co. echoes Miller Tabak's $67 target. Stifel Nicolaus has a $65 projection and KeyBank expects a rise to $61. Morgan Keegan offers the lowest target, at $60, implying 11% of upside in the next 12 months.
Forward P/E: 16 (Banking Industry Parity)
Sales Multiple: 2.9 (66% Industry Premium)
Cash Flow Multiple: 9.2 (37% Industry Discount)
Book Value Multiple: 1.4 (12% Industry Premium)
Miller Tabak's Thesis: FirstMerit falls into a favorable risk/reward category, given its low-risk assets. Miller Tabak recognizes that the worst balance sheets may offer the most upside in 2011, but favors FirstMerit due to expectation of a strong merger and acquisition environment in the second half of the year. It believes FirstMerit will benefit from this trend because its high-quality asset base makes it an ideal target for a takeover. Conversely, it could scoop up distressed assets or competitors at reasonable prices given its strong balance sheet. Miller Tabak expects FirstMerit to double EPS between 2010 and 2012, giving its stock outstanding upside potential in 2011. Analyst Ratings: The Street dissents with this bullish call. Currently, six analysts rate FirstMerits's stock "buy" and 10 rate it "hold." None rank it "sell." JPMorgan has a price target of $22 on the stock, suggesting 14% upside. Macquarie and RBC Capital Markets expect the stock to hit $21. KBW predicts that the shares will fall to $18.
Sales Multiple: 2.2 (43% Industry Discount)
Cash Flow Multiple: 53 (178% Industry Premium)
Book Value Multiple: 4.7 (38% Industry Premium)
Miller Tabak's Thesis: Loral owns Space Systems/Loral and has a 64% stake in Telesat. The company has filed for an IPO of Space Systems and Telesat's Board has indicated that it is exploring alternatives for the stake, so Miller Tabak expects a break-up with minimal tax leakage. It estimates a "midpoint equity" break-up value of $91, suggesting 17% upside. This investment strategy qualifies as event-driven, risk arbitrage.